OHIO

LAWYERS WEEKLY
July 9, 2001

THE MOST IMPORTANT OPINIONS OF 2000

January - June 2001

NOTABLE COURT OF APPEALS DECISION

INSURANCE

Insurers Liable For Misleading Customers

MARTIN, ET AL. V. GRANGE MUTUAL INSURANCE COMPANY

(Lawyers Weekly No. 111-036-01) (16 pages) (Christley, J.) Appealed from Geauga County Court of Common Pleas. Patrick J. Perotti, Patrick T. Murphy, Amy Trejbal and Ronald Margolis for the policyholders; Donald A. Powell and Robert L. Tucker for the insurance company. (No. 99-G-2255) (March 16, 2001).

An insurance company could be held liable for misleading its policyholders into paying for certain uninsured/underinsured motorist coverage made unnecessary by a change in state law, the 11th District Court of Appeals decided in a class action.

The insurance company argued that providers of insurance have absolutely no obligation to apprise policyholders of pertinent changes in insurance law and, therefore, the policyholders' tort, contract and breach of fiduciary duty claims failed as a matter of law.

But the 11th District disagreed. The court concluded, based upon the "implicit" recognition of such claims by the Ohio supreme Court in the 2000 case of Baughman v. State Farm Mut. Auto. Ins. Co., that the policyholders' claims could survive summary judgment apart from the existence of any duty to disclose borne by the insurance company.

"Because [the insurance company] failed to fully address [the policyholders] claims with respect to breach of contract, breach of fiduciary duty, misrepresentation and fraud predicated on a failure to disclose, negligence, conversion and unjust enrichment, the company did not sustain its burden of demonstrating a lack of a genuine issue of fact." wrote Judge Judith A. Christley in reversing, in part, the trial court's grant of summary judgment in favor of the insurance company.

In so deciding, the court further recognized that, while an insurance company does not have a legal obligation to keep policyholders informed, it could assume such a duty through prior conduct.

Alleged Misrepresentation

This case involved the fundamental question of what constitutes fair dealing between an insurance company and its policyholders, according to Painesville attorney Patrick J. Perotti, one of the attorneys for the policyholders in the case.

"These types of cases arise out of the question of whether an insurance company can lie to policyholders in the insurance policy and the declarations documents by telling them that they are being billed in order to pay for and buy [UM/UIM] coverage when in reality they are buying 'guest' coverage," said Perotti.

The attorney explained that the trial court went astray when it placed too much emphasis on an insurance company's duty to disclose changes in the law.

"The trial judge told us that he was going to rule against us on our duty to disclose claim, which didn't bother us because it wasn't the main thrust of our case," explained Perotti. "But then he said that, by ruling against you on this claim, your lawsuit is dismissed."

Perotti said that the "real thrust" of the case was misrepresentation.

"The case had to do with whether [the insurance company] sent out a policy that contained an other owned vehicle' exclusion that was fraudulent, therefore, or did the company send out billing sheets telling policyholders that they needed to pay more than one premium when, in fact, they needed to only pay one," the attorney said.

- PATRICK M. MURPHY